By Max Clarke

October 2011 will witness the biggest shake up of temporary workers’ rights, as the Agency Workers Regulations comes into force.

Many business owners may wrongly assume they are prepared for the changes or that the regulations will not apply to them.- potentially fatal errors for time and cash constrained enterprises.

Frances Lewis, a leading employment lawyer at Osborne Clarke, urges businesses of all sizes to implement the changes needed to prepare them for the biggest shake up of employment law in a generation.

The changes, Frances explains, are designed, broadly, to give agency workers engaged in the same role with the same hirer for 12 weeks the same basic rights enjoyed by directly employed staff.

This means benefits such as equal pay, holiday pay, bonuses, child care, car parking privileges, on-site canteens and annual leave entitlements. There are also rights to notification about job vacancies. However, occupational benefits fall outside the regulations, including contractual sick pay above the statutory minimum, pensions, redundancy pay and maternity pay.

So, what should hirers do as they prepare for October? Initially they must establish who on their staff are or could be agency workers. That may not be as obvious as it sounds. In addition to personal service company complications making it unclear who is an agency worker, there will be some service contracts which in reality are supplies of staff rather than service deliverables and which will give rise to agency worker obligations. Many large financial institutions, for example, move people around and not everybody is aware that, for example, a bundle of workers in one function are, in fact, no on the full time staff.

Organisations are advised to check the terms of service contracts, particularly where the service provided is personnel intensive, to ensure that the service provider is responsible for the staff who work on the service, not the user organisation. This will be a matter of both contract and practice.

It is also crucial that hirers minimise the supervision and direction given to contractors who work through their own personal service companies. Supplying agencies need to work with hirers to ensure that contracts spell out that the agreement is for the supply of independent contractor services rather than supervised staff.

Hirers and agencies should avoid using personal service company arrangements and the like in an attempt to place workers outside the scope of the regulations. The more workers are channelled into personal service companies, the less credible the model will become. Such practices could also expose suppliers to serious tax liabilities under the Managed Service Company tax legislation. Generally speaking roles involving the services of lower paid and lower skilled workers will not be suitable for personal service company contracting or other types of non-PAYE solutions such as use of sole trader or offshore payment intermediaries.

There is, concludes Frances, no one-size-fits-all solution to dealing with the regulations. The best approach is to be open to adopting different approaches for different types of supply.

There is a balancing point between risk and cost that hirers and suppliers of agency workers will need to find with the Agency Worker Regulation. This point is likely to change over time as decisions start to come through from case law decisions but not searching for it could lead to greater cost and reputational damage than anticipated.

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